where contagion meets contagion !! ------------------------------------------------------------ TAX 'CONTAGION' HITS
Australia has proposed a supertax on mining profits Friday May 21,2010 By David Shand.
WORRIES that Australia's proposed supertax on mining profits could spread to other countries deepened the gloom for blue chip miners yesterday.
Already bearing the brunt of investors' flight from riskier assets in the wake of Europe's sovereign debt crisis, as well as China's efforts to prevent its economy overheating, the sector was further undermined by talk of a "tax contagion".
Broker UBS warned: " There is a real possibility that some other mineral producers will follow Australia's example ". Brazil, Mongolia, Chile and Zambia were cited as potential higher tax countries.
Dealers also noted negative comments from Merrill Lynch, which downgraded heavyweight stocks including Rio Tinto and Xstrata, down 172p to 2812p and 40p to 893p, Vedanta Resources, off 82p to 2119p, and Kazakhmys, 49p weaker at 1089p.
Merrill added: " We don't see miners outperforming during a period of market-wide de-risking. Near term, things do look tough for the miners, in our view. Recent measures announced by the Chinese authorities to cool the property sector are expected to lead to a slowdown in activity in the housing sector, which should weigh on metals demand ".
" Market apprehension over a slowdown in Chinese metals demand has been exacerbated by concerns over contagion from Southern European sovereign debt ".
BP and Shell, up 5p to 528p and 1p to 1762p, shrugged off falling oil prices to join a handful of top flight companies in positive territory. But the FTSE 100 still slid 84.95 points to 5073.13.
